I’m about to tell you how to make money by giving things away!

Perhaps your church or group has sponsored an occasional clothing exchange. I’m not talking about a rummage sale where you donate your unwanted clothes and they sell them to support the organization. I’m talking about an event where everyone brings their unwanted clothes, perhaps on a Saturday morning, and everyone can carry away other members’ unwanted clothes. So, you can get rid of that funky sweater someone ‘gifted’ you with and pick up a great pair of pants, or whatever.

What if this happened on a grander scale and was about whatever you’re interested in, not necessarily clothing? Imagine a regular location where this free exchange went on every weekend, or even every day?

Do you see where the profit is in this? Since you could be the one who organizes and maintains it, it is only fair that you get first pick on everything that comes in. If you let everyone know right up front that that’s exactly what you’re doing, they’ll all be OK with it. I can assure you of that, because I set up a business that grew nearly overnight into a large, ongoing free general exchange in Marin County, California, and that’s what actually happened.

More specifically, I rented a 2,500 square-foot store, primed it with stuff I bought for next to nothing at garage sales, and opened to the public. In my exchange, I allowed exchange of anything of reasonable size (no refridgerators or mattresses, please!) There were many books, garden tools, car parts, sports equipment, you name it. But I could have specialized in appliances, bicycles or car parts and accessories, clothing, computer gear, or pretty much any type of thing. A couple of years later, I set up a quite successful specialty exchange, dealing just with books, CDs and DVDs.

Never once did anyone complain that I had first pick. Quite the contrary, I received complements all day long for the nature of the business.

Another thing that might surprise you is that I received much more stuff than I gave away. There was so much stuff coming into my exchanges, that much had to be discarded.

When people decide to clean out the attic, basement or garage, they tend to bring multiple boxes full of stuff. There were hundreds of wealthy people who brought things to the exchange just so other less wealthy people could get them. All these donors knew full-well that I was supporting the business by picking the cream off the top.

I’m sure you can imagine what I did with the one percent or so that I picked. Right, I sold them on Amazon and eBay.

I only ran my exchanges as experiments for four months each.

During my first four months, in the general exchange, a volunteer ran some math and worked out that I gave away $44,000 per month worth of stuff. This was just wonderful for all the people who came from the poorer areas east of Marin and were able to get good things for their children and themselves. Even though the store was in a rather fancy suburban neighborhood, and many of the ‘shoppers’ came in junky cars and looked kind of scary to the locals, I was often told how much it was a great community service by the well-off locals.

I have been more of an experimenter than a do-the-same-profitable-thing-year-after-year person – probably to my detriment, but my exchanges could have been huge successes. Instead of moving on to the next experiment, I suppose they could have branched out, and I’d be very successful in the exchange business. But, being an experimenter and a writer, I’ll leave starting the next exchange up to you.

Imagine the potential. If you specialize in musical instruments, you’ll get instruments into the hands of children and adults who couldn’t otherwise afford them. If someone has had their instrument stolen or broken, you can provide them with another. You can provide sheet music. It wouldn’t be surprising if your free sheet music collection could become larger than what any store in town carries. You could have walls filled with free CDs. Interestingly, your place can become a destination for musicians. Many will volunteer to help your efforts. Everyone will just love hanging out, offering advice, repairing instruments, talking shop, jamming – well, you get the idea. What a place it can become!

If you specialize in clothing, you’d be offering a great service indeed, as people who can barely afford to clothe themselves and their children will get what they need. Their hard-earned money will go to better quality food, paying back bills, and so on instead of clothing, and they can dress proudly, not shabbily.

Of course much of the stuff that comes in will be in sad shape. You’ll get brass instruments that are quite dented. You’ll get torn clothing. You’ll get books that are 30 years old. You’ll get unidentifiable car parts. You’ll get wobbly furniture. But not all of it will be junk!

When it’s free, you’d be surprised how delighted someone can be with “70’s Pop Tunes.” When it’s free, people will figure out a way to fix that chair with the missing leg, or the vase with the crack in the side. Or if they can’t fix it, they’ll have fun trying. You may not be too happy about selling the good things that come in, even though that could be quite profitable. But if a stamp album comes in that you can sell on eBay for $4,000, that money will go along way to support the exchange, wouldn’t it? That way, you can get a lot more servicable goods into a lot more hands.

Perhaps the bulk of the money will be from selling pieces of broken things. As far as I went with pieces is that I experimented with two student-model flutes. I took them apart and listed the pieces on eBay. They each brought just over $100, after all expenses, selling most of the bits and pieces for $10 each. I once took in a guitar that was cracked on all sides, and missing a couple of tuners. It was not a production model. It appeared handmade, having no brand name and no model, but it had excellent inlay around the sound hole. I put it as-is on eBay, expecting maybe I’d get lucky, with a winning bid of around $20. It sold for $203.

The reason I created two exchanges was that I wasn’t quite happy with the first one.

My first version started out quite large, and I had a rag-tag assortment of about 20 volunteers. Not being a great manager, I quickly lost a degree of control over these people. Some came in drunk, some complained about everything in sight, some treated the clientele crudely. So, if you’re going to do this, you’ll either want quality employees rather than volunteers, or you’ll want to screen your volunteers better, or you’ll want to have a more alpha personality. Or, perhaps the best solution, is keep it small and manageable, perhaps in a 700 – 1,000 square foot space in a smaller community, or hidden away in a neighborhood.

That’s what I did with my second exchange. I wanted something smaller and more manageable. It was 1,000 square feet, about a third the size of a typical 7-11 store, in a town of just under 20,000 residents. Initially I did everything myself, no volunteers. I decided to specialize in books, CDs and DVD movies, because I figured I’d have a quieter, more focused clientele. I was exactly right. The second exchange was just as profitable, yet much less hectic, and therefore more fun for me.

Speaking of profit, I spent about $10,000 setting up the second exchange. I could have done it with less, but in my case, I didn’t need to. By the end of the second month, I was making $5,000 per month profit. At the end of the four-month experiment, I sold it quickly for $32,000. (If I had wanted to, I could have held on for a year, and sold it for much more!)

A bit of a problem with the first, general exchange was waste. Since I was taking everything, not just books and disks, I had to rent larger and larger dumpsters to accommodate the things that weren’t worth even giving away. At the end of the fourth month, I was paying $250 per month for dumpster rental.

To avoid discouraging people from bringing things, I decided never to decline any reasonable donations. I stand by this, and believe it’s better to spend a bit on garbage pickup than losing donations from people who start to figure you may not accept what they bring. Interestingly, things they assume you don’t want may be wonderful donations. I received a sousaphone that’s bell was crushed all out of shape. It was awful in appearance, but still played, so I gave it away.

If an item needs repair, you may be surprised how many volunteers are available to fix it. They may prefer to fix it in the exchange – if you have the space for a repair area. This is so they can become part of the social scene. Or, they may want to take things home to repair them. But what if the volunteers are unreliable? What if someone brings a sweater home to reknit a blown seam, and never brings it back? If you were going to give it away anyway, no loss!

In the case of an item beyond repair, you can sell what parts are good. There’s good money in a sousaphone mouthpiece or valve if someone needs that exact part on eBay. I have studied the bicycle parts sections of eBay from time to time, and am amazed how many ordinary everyday parts are being sold there. I once took apart a Roomba vacuum cleaner, and sold all the parts for well over $100.

I had a sign on the front window of my general exchange that told people not to leave donations after hours. But they did. Most mornings I’d find a enough bags of worn-out clothing, broken lawnmowers, sofas without cushions, and so on to fill a pick-up truck. These were the things that people just wanted to dispose of, didn’t want to pay landfill fees, and would be too embarrassed to try donating to the store during the day. Of course this wouldn’t be so much of a problem with a specialized exchange. In fact, the nighttime donations might surprise you. Someone once left two banker’s boxes full of old records. I called my friend Ken, who paid $100 per box for the collection. He took about six albums per box, and donated the rest back to the exchange.

In my media exchange, I learned to solicit nighttime donations. I had a drop box with a slot outside. Hundreds of books per months came in through that slot. I used a slot rather than an open container, because I didn’t want other people coming by and rummaging through the books before I had a chance to pick through them. I also put a free shelf outside, so visitors could get books, and occasionally music CDs, any time of the day or night.

Taking the concept one step further, you might be able to design an exchange that doesn’t need your presence at all. One way is to staff it with volunteers. Another is to have drop boxes around town, much like some clothing companies do, in which you ask people to drop of things they’re not using. On the drop boxes, you’d have signs indicating what you’re doing – donating most of the stuff to children overseas – or locally, for that matter.

I believe you should also state that you’re making a profit in the process. If you’re up front, not only will no one complain, but many will just love what you’re doing. If you try to hide it, people will undoubtedly get the wrong idea. Unfortunately, some of those companies that put out clothing donation boxes a few years ago developed a bad reputation for not actually fulfilling the promise of making good use of the donated clothing.

A little aside here: As I understand it, a fellow in Boston advertised on Craigslist that he would pick up unwanted books. He didn’t mention what he was going to do with them. He didn’t promise anything. Yet, many people gave him thousands of books, which he sold on Amazon.com.

Taking it even a step further, I can imagine that you might have a charitable arm. But that’s up to you. It is quite possible that a year or two after you start an exchange it becomes so profitable that you would have money left over with which to do good work.

To round out the picture, it would also be possible to have specialty exchanges that are simply shelves in public locations. The idea is people can drop off CDs, DVDs, books, toys, or whatever they don’t care about any more, and pick up ones they like – all for free, of course. Your job, besides keeping the shelves organized and clean, is to go through the stuff that comes in, gleaning what will sell online. Quick oil change places, laundromats, and restaurants would all love to have such a shelf.

You can tighten up the efficiency of free exchange shelves a bit by having a box with a slot on the shelves. Signs tell people to drop donated music into the slot, and take whatever they want. The point is you don’t want people carrying away the obscure and possibly valuable items. You want to be able to sort everything that has been donated before it gets away.

Don’t forget to have contact info so if someone has boxes and boxes of stuff, they know how to contact you for a free pickup.

If have not tried this exact business model myself. I did, however, put book shelves in eight laundromats. These weren’t exchanges. I purchased the books by the boxful at garage sales, paying on average five or ten cents per book. I then put them in the laundromats with signs saying, “Put $3 in the slot per book.” I split the money 50/50 with the laundromat owners or managers. Sure, some books were stolen from my shelves, but I never noticed, and it didn’t significantly impact the bottom line. These shelves were quite profitable for the small amount of time involved.

Music CDs ought to work especially well. Millions of people are looking for music they haven’t heard to put on their iPods or smartphones, and then discarding the CDs once they’ve finished uploading. It’s recycling at its best, isn’t it?

Getting back to the idea of a full-size exchange, when you pick a location, it is important to have good parking. This can be even more important than for an ordinary retail store, because many people are going to be bringing large loads of stuff. If they have to carry it a hundred yards (100 meters), they’ll be less inclined to bring stuff next time. Fortunately, the parking was very close to my first exchange. Even still, I provided hand carts for people to get things from their cars into the exchange. You don’t want anything to come between people and their desire to bring things to your exchange.

And yet, parking was a problem. My store became rather popular within a very short time. (Advertising and publicity is absolutely not necessary in a business that exists to give things away.) The problem was the parking lot became congested. And that, ultimately, was the downfall of my experiment. When traffic started clogging the little strip mall I was occupying, the neighboring businesses started to complain. The property manager suggested I leave. Oh, I could have worked things out, but since I was ready to move on, I just pulled the plug.

So, you can learn from my experiments. One thing I’d recommend if you want to start your own exchange is to start very, very small. You don’t need to rent a store. Depending on where and how you live, you might want to start it out of your garage. Or you can rent a space in a flea market. Or set up something cooperatively with someone who has commercial space available. For instance, you might find a quick-change oil change place who would gladly donate some lobby space in trade for hundreds more people getting their oil changed there.

I’m not the first one who set up a store to give things away. The precedent was set in 1968 at the Digger Store in the Haight-Ashbury neighborhood of San Francisco. The Diggers were a loosely assembled group of entertainers (one of whom was Peter Coyote) who started making free soup, beans, and bread for the hippies that came to the Haight during the Summer of Love. In time, they rented a storefront where they accepted donations of clothing and general merchandise, and gave everything away. I did a bit of research and never found out how they paid the rent. My guess is that they came up with the first month’s rent, then just coasted until they were evicted. That store, too was a short-lived experiment. Digger Archives

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